Alex Salmond could be forced to increase property taxes after independence and
his plan to make Scotland an economic powerhouse is “highly speculative”,
according to an expert report published today.

The Institute of Fiscal Studies (IFS) said the First Minister’s proposal to cut corporation tax by three pence in the pound required "strong assumptions and a large dose of guesswork".

Echoing concerns about a race to the bottom with the remainder of the UK, the report said the move could result in lower combined revenues between the two newly separate countries than at present.

An independent Scotland would face public spending pressures at least as strong as those buffeting the UK, the report said, with council tax among the levies that were most suited for reform to raise more revenue.

In a separate study, another economic think tank warned that North Sea oil revenue would not “fill the gap” left in Scotland’s finances by the withdrawal of Westminster funding.

Glasgow University's Centre for Public Policy for Regions (CPPR) highlighted the value of the Barnett formula, which gives Scotland around £1,200 more per head of public spending than the UK average.

Alistair Darling, the leader of the pro-UK Better Together campaign, said the SNP’s economic credibility “lies in tatters”.

The former Labour Chancellor said: “Before we could even start making good on the SNP’s false spending promises, an independent Scotland would have to make billions of pounds worth of cuts to public services, benefits and pensions.”

Mr Salmond has claimed that reducing corporation tax in a separate Scotland would attract businesses, creating 27,000 jobs and increasing GDP by more than one per cent.

But the IFS said there was "little way of knowing" how much additional investment cutting corporation tax would attract and the remainder of the UK could match the reduction, resulting in “harmful” competition.

Motoring taxes could be lowered after separation, the report suggested, as there is lower congestion on Scotland’s roads.

However, it said there would be a “strong case” to focus more taxes on property, including a reversal of the trend that has seen council tax rates in Scotland fall “well below” English levels.

The SNP has previously suggested replacing the council tax with a local income tax. Mr Salmond has also claimed that North Sea oil would be worth up to £300,000 per person after independence.

But the CPPR report said: “Oil-related tax revenues would fail to fill the gap left from the loss of Barnett-related UK funding in an independent Scotland.”

The economists said Mr Salmond could squirrel away some revenues in a special oil fund if he cut spending on areas that are currently Westminster’s responsibility, such as defence.

It noted that previous Scottish Government forecasts for oil revenues have been over-optimistic. But a Scottish Government spokeswoman said: "We welcome the CPPR's conclusion that the economic rationale for an oil savings fund is clear and a 'worthy ambition'.

“Only independence provides Scotland with the opportunity to make the significant improvements to the tax system which the IFS have highlighted in their report."